Teacher pensions put strain on state

More than 70 percent of full-time teachers and school staff who retired in the suburbs and Downstate Illinois in the last decade pocketed double-digit pay increases and other perks shortly before leaving--costing state taxpayers millions in higher pension payments, a Tribune investigation has found.

Using such salary spikes to boost pensions is legal in Illinois but highly unusual and sometimes outlawed elsewhere as public pension plans around the country try to control costs, national and state retirement experts say.

The perks have been doled out even as the economy soured, local districts battled deficits, and the Teachers' Retirement System--which covers all state districts except Chicago--struggled with shortfalls. The TRS is considered one of the worst-funded state pension plans in the nation.

The bonuses, buried deep in teacher contracts negotiated by unions and local school boards, have gone largely unnoticed by the public. But though local districts pay for the perks initially, the cost of the inflated pensions that result is spread to taxpayers statewide, who largely fund the TRS system.

Last year, 7 in 10 full-time teachers and staff who retired in the suburbs and Downstate saw their earnings rise by 15 percent or more at least once in their last three years, an analysis of retiree data shows. And 4 in 10 of those retirees got at least one increase of 20 percent--more than five times the increase in average teacher pay that year.

As any pensioner knows, big pay increases pad pensions because the highest salary years are used to calculate retirement pay for years to come. If pay hikes for many of the retirees in 2002 alone had been capped at even 10 percent, the state pension system could have saved at least $120 million in retirement costs over the next two decades, the Tribune found.

Teachers unions and local school officials say the end-of-career pay hikes are used to reward longtime, dedicated teachers whose salaries have lagged for years.

Salaries for teachers are low compared with other professionals with similar education, said Anne Davis, president of the Illinois Education Association, and the end-of-career pay hikes help ensure a decent retirement benefit.

"Certainly a career teacher who has really given their time and their dedication and effort ... to be able to have a reasonable salary upon retirement, I don't think there is any citizen who would want to deny that to teachers," Davis said.

State figures show the average full-time teacher salary in Illinois was $49,679 last year, and teachers with more than 25 years of experience earned $65,245 on average.

School finance expert Michael Podgursky, chairman of the economics department at the University of Missouri-Columbia, was astounded by the perks for retiring teachers in Illinois.

"We're running schools to teach children to learn, and we should be doing this in a cost-efficient way to taxpayers," Podgursky said. "It's hard for me to imagine that this is the best way to spend additional money to raise student achievement."

Strike fears blamed

Sometimes school boards feel pressured at the bargaining table to award the perks because they don't want dissatisfied teachers to go on strike, said Michael Johnson, executive director of the Illinois Association of School Boards.

"What boards face here is whether they're going to have kids out on the street," Johnson said. "Boards don't like to give salary increases," he said. "Very rarely does a board member come in and say, `I'm really happy with the contract.'"

Local school officials say retirement perks can save them money by encouraging senior teachers to leave and allowing them to be replaced with younger teachers who are less well-paid. But they acknowledge they don't consider the cost to state taxpayers for the inflated pensions that result.

Under Illinois law, pay increases as high as 20 percent from one year to the next may be included in pension calculations for most retirees. Anything over that isn't counted.

State retirement officials say the 20 percent cap was instituted in the late 1970s, when 40 percent and 50 percent pay raises for outgoing educators prompted an outcry.

A Tribune review of more than 100 teacher contracts from suburban and Downstate districts found a variety of ways to pump up the salaries of exiting teachers, including retirement bonuses and severance pay such as cash for unused sick time. Teachers also can make more money by taking on extra duties, such as coaching and sponsoring clubs.

Some districts give teachers cash to help cover health-care costs after they retire; others cover the hefty payments that teachers owe to the state if they want to upgrade their retirement plans to get more lucrative benefits.

Most districts require teachers to work a minimum number of years in the district, and to give one or more years of advance notice of retirement to qualify for the perks.